Start with travel advisors who are desperate for cash flow. Add suppliers who need a healthy distribution channel to calm wary travelers. Muddy the waters with commission recalls of $50,000 or more. And suddenly, the industry is abuzz with talk about paying travel agencies their commissions earlier in the cycle.
This being 2020, it’s no surprise that just as some applaud the idea, others call it a huge mistake. But in the space between, suppliers and advisors are Zooming about ways to make their payment policies fit the new reality.
“We’ve never had a program that pays advance commissions to travel advisors until now,” says Stephanie Mirando at Collette, which last week guaranteed $100 to $200 in commission on every reservation booked in 2021 for travel starting after May 1. Like a fee for service, advisors can keep it even if the trip is canceled.
“If anything positive came out of all of this, it’s that companies are relooking at their commission policies and making them travel-advisor centric,” Mirando told me. “So many of these programs have become outdated; it’s more important than ever for suppliers to look at those long-standing policies.”
And indeed, they are. “I do think there will be systemic change,” Signature Travel Network CEO Alex Sharpe told me. “But right now we’re looking for some short-term relief. And suppliers have been open to it.”
While the concept sounds great, though, many travel advisors have felt the sting of the flip side. As they struggled to stay afloat at the height of the pandemic, they were hit with recalls for commissions they received back in 2019. With annual sales of about $14 million and 20 ICs, for example, Post Haste Travel owner Grace DeVita paid back more than $60,000 in commissions in March and April — including about $28,000 to Allianz for canceled travel insurance policies. At Rock-IT Travel TPI, owner Shauna Sharp repaid $50,000 in commissions on her $1.5 million in 2019 sales, mostly from canceled destination weddings and travel insurance.
At the Negotiating Table
Still, though, talks have been going on between suppliers and large agency groups like Virtuoso, Travel Leaders and Signature Travel Network. Suppliers have been responding — and ASTA last week offered up new wording for travel advisors to include in their supplier contracts.
“We’ve been addressing the idea of accelerating the commission pipeline for a few years now,” Sharpe says. “Initially, the thought process was that when new advisors make that first sale, the fact that they wouldn’t get paid for eight months was a barrier to entry. But, as we’ve gotten into covid, cash flow has become a more important issue for advisors — and particularly for agency owners who have salaries and rents to pay. Many are looking at their commission pipelines and saying, ‘There’s $1 million in there for next year. But I’m not sure I’m going to get there.’”
That was precisely the thinking at Globus, who stepped up in July with a program that pays commission on any payment of $25 immediately. “That naturally occurs at deposit and at final payment, and also when in the course of the booking they add air or pre- or post-nights, or make changes in the reservation,” says VP of sales Paula Hayes.
While she declined to cite the total amount paid out for the program since it was announced, “I can tell you we had a payment in the millions in August because we paid commissions for anything booked for 2021, including a retropayment for bookings made back in 2019 for 2021 travel,” she says
Collette, last week, took it a step farther. At the time of deposit, it will pay a portion of the commission on any departure after May 1, 2021—and travel advisors can keep that even if the reservation is canceled.
At ASTA, meanwhile, “we started to receive many inquiries from our members related to responsive actions suppliers were taking that adversely affected advisors, travelers or both,” said a spokesperson. “In connection with travelers who accepted future travel credits, often suppliers are withholding commissions until the rebooked travel is completed, which works an obvious hardship on our advisors’ businesses.”
The point of the new clauses is suggesting that “the supplier’s right to do those kinds of things is usually based on advantageous provisions in its agreement with the agency. So, we felt creating a template addendum to revise these contract terms between the agency and supplier might help level the playing field somewhat.”
Tips for the Cash-Flow Challenged
While tough times have advisors anxious for extra cash to pay bills, insiders caution that whenever possible, commission funds should be kept in a separate account — and not prepaid to ICs — until the client actually travels.
But as you wait it out, says Sharpe, it’s always better to have the cash in your bank rather than your supplier’s.
“Our intention is to get the money into the hands of our agency owners, and they will determine how to handle the payment of their advisors,” he said. “Like anything, it will come down to relationship and common sense. If you have an IC that books one World Cruise a year with you, I am not sure I would pay commissions before they are 100% guaranteed. But if you have advisors who have a regular flow of commissions due, to give them an advanced commission has much less risk.”
For suppliers concerned that agencies might not be able to repay them if trips are canceled, Signature, as a cooperative organization, is “considering ways to mitigate the financial risk to suppliers by assuming the risk, where if an agency cannot pay them back, we would make them whole,” Sharpe said.
“If that’s the difference between getting a deal that makes sense and not having a deal, we’d absolutely be willing. If there is a way for suppliers to be comfortable, to incent agency owners to get paid sooner or get paid on the portion that’s been paid to the supplier, we think there’s value in that. Everyone is focused on finding a solution.”
Collette says it was looking for a way to help travel advisors without just sending their bill to someone else. “We really wanted to make sure it wouldn’t be a burden on our partners, so we decided not to recall the advanced commission if a client cancels,” says Mirando. “If we were going to launch a new program, we wanted it to be of value across the board.”
And indeed, travel advisors love the idea — as long as it is nonrefundable, and not added into the price so that customers can book at lower cost if they go direct — and hope it spreads across their supplier base.
“Collette listened to what advisors said they wanted and needed from suppliers going forward, and responded. To my knowledge, Collette is the first supplier to change their policy in an effort to meet the changing needs of travel advisors, as well as to incentivize sales for the company,” says Jennifer Walker, of Jennifer Walker Travel. “Collette has gotten out of the gate ahead of other suppliers, I am pleased to see this change and hope to take advantage of it in the near future.”
Says Sandy Schadler, of Travelink, American Express, “I appreciate Collette’s leadership in addressing this issue as we open up conversations about up-front commissions with all our partners. We will continue to need to touch each trip multiple times and this first step begins to recognize the large amount of effort required by travel advisors to sell and then support the sale all the way through completion. I look forward to a lot more movement in this space from all travel suppliers who truly value our partnership as their extended sales and service team.”
But while a steady flow of $100 per booking from suppliers will surely help their bottom lines, some what they really need is long-term relationships with great partners.
”Back to basics,” says Teri Hurley of Endless Love Travel. “Search for the right supplier that backs travel agents and fits the client’s needs.”
Cheryl’s 40-year career in journalism is bookended by roles in the travel industry, including Executive Editor of Business Travel News in the 1990s, and recently, Editor in Chief of Travel Market Report and admin of Cheryl Rosen’s Group for Travel Professionals, a news and support group on Facebook.
As an independent contractor since retiring from the 9-to-5 to travel more, she has written regular articles about the life and business of travel agents for Luxury Travel Advisor, Travel Agent and Insider Travel Report. She also writes and edits for professional publications in the financial services, business and technology sectors.